On March 18, 2013, Democratic Perspective discussed the future of energy with one of our board members, Bill Timberman. Following is the report written by Bill as the basis for the program:
In Australia, even non-subsidized wind power is now cheaper than either coal or gas. Is this the future? We thought so, but….
Bloomberg New Energy Finance has done research on Australia which shows that since 2011, the cost of wind generation has fallen by 10% and the cost of solar photovoltaics by 29%. In contrast, the cost of energy from new fossil-fueled plants is high and rising.
The recently published study shows that electricity can be supplied from a new wind farm at a cost of AUD 80/MWh (USD 83), compared to AUD 143/MWh from a new coal plant or AUD 116/MWh from a new baseload gas plant, including the cost of emissions under the Gillard government’s carbon pricing scheme. However even without a carbon price (the most efficient way to reduce economy-wide emissions) wind energy is 14% cheaper than new coal and 18% cheaper than new gas.
“The perception that fossil fuels are cheap and renewables are expensive is now out of date”, said Michael Liebreich, chief executive of Bloomberg New Energy Finance. “The fact that wind power is now cheaper than coal and gas in a country with some of the world’s best fossil fuel resources shows that clean energy is a game changer which promises to turn the economics of power systems on its head,” he said.
The end of easy oil and gas? Not exactly.
As recently as ten years ago, most experts thought that so-called easy oil and gas, recovered by conventional surface drilling, was coming to an end. Continuing to expand oil and gas production was thought to require either drilling in the ocean at previously unheard of depths, or processing marginal deposits of heavier petroleum, like those in the Alberta tar sands. Both these types of recovery were technologically challenging to implement, more expensive and more harmful to the environment than conventional drilling, and more dangerous, as evidenced by BP’s Deepwater Horizon well blowout.
Hydraulic fracturing: the game changer.
The Bakken formation is a 200,000 square mile shale layer, mostly in Western North Dakota, but extending west into Montana, and north into Manitoba and Saskatchewan. It contains, according to estimates, anywhere from 100 to 400 billion barrels of light sweet crude oil, almost all of it now easily recoverable, thanks to the new technology of hydraulic fracturing (fracking). Previously proven reserves of oil in the entire United States amounted to only 23 billion barrels. The new oil from North Dakota is expected to allow the U.S. to surpass Saudia Arabia as the world’s largest oil producer within 10 years.
Currently, there are about 8,000 producing wells in North Dakota. 2,000 will be added this year alone. It is estimated that a fully developed Bakken Formation can support a total of between 35,000 and 45,000 wells.
It should be noted that fracking has already been ramping up in other parts of the country — Texas, Pennsylvania, and New York, for example — where there are other Bakken-like shale deposits. So far, these are largely natural gas producers, and their increased reserves, and increased production, have already helped drive the cost of natural gas in the U.S. down to less than 1/4 of the price Europeans pay.
TransCanada’s Keystone XL Pipeline.
If built, at a currently estimated cost of $5.3 billion, this pipeline will carry 830,000 barrels of oil per day 1,179 miles from Hardisty, Alberta right through North Dakota and the Bakken Formation oil fields to the refineries to Nederland and Houston in South Texas. This could carry not only tar sands oil from Alberta, but oil from the new Bakken fields to the refineries on Texas’ Gulf Coast.
In January of 2012, citing the need for further study of environmental impacts on the Ogallala aquifer and the Sand Hills area of Nebraska, President Obama delayed a decision to authorize the northern half of the Keystone XL pipeline until after the 2012 election. (In March 2012, he gave the go-ahead for the construction of the southern half of the project, from Cushing Oklahoma to the gulf coast.) The president is expected to make a final decision in August. Meanwhile, a bill was introduced in the Senate to transfer the decision from the president to Congress. Its sponsors believe they have enough votes to overturn a potential veto of the bill.
The Politics.
On one side,
1. U.S. and Canadian-based global energy corporations looking in the short and medium term to protect their existing investments in fossil fuel development and to benefit from the bonanza promised by the increased production made possible by the new drilling technologies.
2. Members of both U.S. political parties looking for a quick and relatively inexpensive way to restore U.S. energy independence, provide an immediate boost in employment, and increase U.S. security from the threat posed by instability in the Middle East and global economic and political competition from China.
3. People looking for good-paying jobs in a depressed economy. As one commentator observing the current boom in North Dakota put it: Difficult to imagine the politician who will now stand between these men and their oilfield paychecks.
4. Global warming deniers, and those ideologically opposed to government regulation of greenhouse gas emissions.
On the other side:
1. Climate scientists alarmed at the rapid progression of global warming, which keeps outrunning even the worst-case predictions of a decade ago. Some think that the tipping point, beyond which the effects are irreversible, has already been reached.
2. Environmentalists, who are concerned not only about an increase in global warming, but also about the pollution of drinking water supplies derived from the same shale formations now being injected with thousands of gallons of the toxic chemicals used in the fracking process.
3. Futurists and political mavericks who believe that investing now in renewable energy technologies is the only way to guarantee sustainable economic development in the long run, and to prevent the sort of environmental catastrophes which could destroy altogether the promise of the past 200 years of economic development.
Which of these two sides wins the coming political battle over how to supply future U.S. energy needs will determine much more than how we power our factories, homes, and transportation networks. It’s very likely to determine, at least in part, whether civilization itself, in its current familiar form, can have any hope of surviving into the next century.
Sources: Harpers Magazine, Project Syndicate, TransCanada, Wikipedia, Financial Post